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Aroni Tubes Private Limited v/s West Bengal Agro Industries Corporation Limited & Others

    WPA. No. 2504 of 2021 with IA. No. CAN 1 of 2021

    Decided On, 23 February 2021

    At, High Court of Judicature at Calcutta


    For the Petitioner: Ayan Banerjee, Debasree Dhamali, Advocates. For the Respondents: Joydip Kar, Sarmila Das, Advocates.

Judgment Text

1. The petitioner challenges a Notice Inviting e-Tender (NIT) dated January 9, 2021 floated by respondent no.1 for the work of installation of Solar Submersible Pump (50 nos.) at Jhargram District. Learned counsel for the petitioner argues that Clause 2.12 of the NIT, debarring Joint Ventures and consortia from participating in the tender, was illegal, being violative of Article 14 of the Constitution of India. That apart, the said Clause contravenes an Order dated December 18, 2020 issued by the Department of Water Resources Investigation & Development, Government of West Bengal, wherein it was stipulated that Joint Ventures, if required, will also be allowed in the tender processes as contemplated therein, which covers the present tender as well.

2. Learned counsel next argues that Clause 22 of the NIT, disallowing price preference and other concessions, violates the Notification dated November 19, 2004 issued by the Finance Department, Audit Branch of the Government of West Bengal. By the said Notification, Rule 47A was inserted in the West Bengal Financial Rules, Volume I, which provides that the State Government Departments/Directorates/Offices, etc., shall adopt the measures stipulated therein in the matter of making of purchases and execution of all works. Sub-rule (1) of Rule 47A stipulates that all registered SSI units of the State are to be given 15 per cent price preference vis--vis large and small scale Industrial Units and other SSI units located outside the State.

3. It is further argued on behalf of the petitioner that, by the same Notification dated November 19, 2004, it was provided that registered SSI units of the State shall be exempted from payment of earnest money for tenders. Such clause was violated in the impugned NIT, since online bids for the said tender could not be uploaded without prior payment of earnest money.

4. Learned counsel for the petitioner argues that tenders having similar illegal clauses were floated earlier by respondent no.1, on which representations were made by a sister concern of the petitioner. Pursuant to such representation, such previous tenders were withdrawn, but again the same illegalities were repeated in the present impugned tender. The petitioner made a representation on January 11, 2021, pointing out the illegalities and asking for withdrawal of such illegal tender. Without considering such representation in the pre-bid meeting, the authorities proceeded with the tender and opened the technical bid on February 1, 2021, subsequently uploading it on February 4, 2021.

5. After service of the writ petition and filing of the same, the matter was enlisted on February 5, 2021, when the respondents went unrepresented. Subsequently, despite having full knowledge of the writ petition, work order was issued in favour of a third party on the morning of February 8, 2021, on which date the writ petition was taken up for hearing.

6. Learned counsel argues that Joint Ventures are independent legal entities and enjoy similar rights as partnerships, while participating in Government Tenders. Thus, such Ventures are protected under Article 14 of the Constitution of India, vitiating the clause of the impugned NIT preventing Joint Ventures from participating in the tender.

7. In this context, learned counsel relies on New Horizons Limited and another vs. Union of India and others, reported at (1995) 1 SCC 478 and Gammon India Limited vs. Commissioner of Customs, Mumbai, reported at (2011) 12 SCC 499, where the concept of Joint Venture was discussed.

8. Learned counsel for the petitioner lastly contends that the clauses of the tender were tailor-made to suit the purpose of some chosen contractors. A comparison of the respective quotations, evident after opening of the price bid, proves such fact. The financial bid was opened on February 6, 2021, on a Holiday, to frustrate the instant writ petition. At least two participants have quoted the same rates, which match each other completely, which could not have been possible unless the bidding was done by such bidders in consultation.

9. It is further argued that five the bidders have varied their rates for the same item (50 Submersible Pumps) in respect of different tenders in such a synchronized manner that each participant has been awarded two work orders. Learned counsel argues that it is extremely improbable that, for the same item, five participants have quoted different rates in respect of the eight tenders, which ultimately led to each of such participants being awarded two work orders. This clearly shows the understanding between the bidders and formation of a cartel, which has been prohibited by the Supreme Court in Excel Crop Care Limited vs. Competition Commission of India and another, reported at (2017) 8 SCC 47. In the said judgment, the Supreme Court deprecated the formation of cartels, which has an adverse effect on competition resulting in increase in price bid and is, therefore, prohibited by Section 3 of the Competition Act, 2002.

10. Learned counsel appearing for the respondents submits that the writ petition is not maintainable at the instance of the petitioner, since the petitioner does not have the credentials as contemplated under Clause 2 of the NIT. The petitioner has failed to plead or prove in the writ petition that it has done one work of similar nature in the magnitude of 40 per cent or two similar nature of works, each of a minimum value of 30 per cent, of the estimated amount of the tender.

11. Moreover, the petitioner has not submitted any bid in the tender process and, thus, cannot contend to be aggrieved by or show affectation of any right of the petitioner in not being able to participate in the tender process.

12. As regards the challenge to Clause 2.12 of the NIT, regarding Joint Ventures and consortia being debarred, learned counsel for the respondents contends that the writ petitioner has failed to show that the said clause violates either any fundamental right or any other law or guidelines of the Government.

13. The Government Order dated December 18, 2020, relied on by the petitioner on such score, merely provides that Joint Ventures will also be allowed in the tender process, “if required”. Hence, the said Order does not create any mandate that in every tender Joint Ventures should be allowed.

14. That apart, the respondents argue that it is settled law that the terms of an NIT cannot be open to judicial scrutiny because it is in the realm of contract, unless it is established that the terms of the tender were so tailor-made as to suit the convenience of any particular person with a view to eliminate all others from participating in the bidding process. Learned counsel places reliance on Meerut Development Authority vs. Association of Management Studies and another, reported at (2009) 6 SCC 171, in support of such proposition.

15. With regard to applicability of Rule 47A, as introduced by the Notification dated November 19, 2004, learned counsel for the respondents argues that the impugned tender was floated for a works contract and the tenderer is required to procure materials for the purpose of carrying out the works contract. The petitioner, it is argued, does not manufacture any Solar Unit, nor Pumps or PVC Pipes. The present contract is not for supply of materials by a manufacturer but a contract where the tenderers have to procure such materials like Solar Panel, Pump, PVC Pipes, cement and brick and thereafter construct a structure, do boring and sinking of the pump and connecting it to a solar panel for automatic operation.

16. The expression “means and includes” in the explanation to Rule 47A clearly indicates that the same is an exhaustive explanation of the meaning. For such proposition, learned counsel relies on N.D.P. Namboodripad (Dead) by LRs. vs. Union of India and others, reported at (2007) 4 SCC 502.

17. The language of Rule 47A, it is argued, leaves no doubt that the facilities incorporated therein are required to be extended to manufacturing units of the State. The impugned tender, however, is not restricted to supply of any manufactured item by a manufacturing unit but is a works contract to be executed upon procuring various materials from various manufacturers. Thus, Rule 47A, it is submitted, has no manner of application to the instant case.

18. Learned counsel submits that no single manufacturing unit is capable of executing the job contemplated in the impugned tender. The job is to be executed by a bidder who has the infrastructure not only to procure various materials but also to erect and install the same.

19. Learned counsel for the respondents further submits that eight tenders have already been finalized and work orders issued. The work is in public interest and any delay in executing the same shall have an adverse effect against such interest.

20. Upon hearing counsel and perusing the materials on record, it is evident from Clause 22.0 of the impugned NIT that no price preference and other concession would be allowed for the tender-in-question. The question which arises is whether the said clause contravenes the Notification issued by the Finance Department of the Government of West Bengal on November 19, 2004. Rule 47A, introduced by such Notification, covers all purchases and execution of all works and is not confined to purchases alone.

21. Sub-rule (1) of Rule 47A specifically provides that all registered “SSI Units of the State” are to be given 15 per cent price preference vis-vis large and small scale Industrial Units and SSI Units located outside the State.

22. The said sub-rule also provides that registered “SSI Units of the State” shall be exempted from payment of earnest money for tenders.

23. However, in contradistinction with Sub-rule (1), the expression used in Sub-Rule (2)(b) is “State-based medium and large scale units”, which will also be given 10 per cent price preference over large and medium units and SSI Units of other States.

24. The explanation to Rule 47A defines the term “State-based Unit”, which are restricted to manufacturing units.

25. The argument of the respondents, that the units covered by Rule 47A have to be manufacturing units, is belied by the language used in the said Rule itself. The distinction between the expressions “SSI Units of the State” and “State-based Unit” makes it amply clear that two different categories of units are envisaged in the rule. The expression “State-based unit” has only been used in Sub-rule (2)(b) of Rule 47A, which relates to medium and large scale units, whereas the SSI Units of the nature of the writ petitioner, being “units of the State” have been provided for in Sub-rule (1) of Rule 47A.

26. Such distinction also becomes clear from the use of the term “major” used to qualify the manufacturing units which are covered by the expression “State-based Units”. Hence, the explanation, by its language makes it abundantly clear that the State-based medium and large scale units covered by Rule 47A (2)(b) have to be manufacturing units situated within the State. The expression “major” preceding the term “manufacturing unit” in the explanation is a further indicator in that regard and shows that the expression pertains to medium or large scale units and not small scale industrial (SSI) units.

27. The language used in Rule 47A(1), however, relates to registered SSI Units of the State, which are to be given 15 per cent price preference. Since the definition of “State-based Units” does not cover the price preference given to SSI “Units of the State” as envisaged in Sub-rule (1) of Rule 47A, such units cannot be confined to manufacturing units. Thus, the defence of the respondents on that score is invalid. Hence, Clause 22.0 of the NIT was clearly in contravention of the Finance Department Notification dated November 19, 2004. The exemption of earnest money, also contemplated in the said Notification, was violated as well by making it a mandatory prerequiite to deposit earnest money for participating in the online bidding process. The NIT is also de hors the Notification on such score.

28. However, the petitioner’s objection as regards Clause 2.12, preventing Joint Ventures and consortia from participating in the tender, cannot be labelled as illegal, since the Government Order dated December 18, 2020 makes it optional (“if required”) to include Joint Ventures in respect of a tender process. It falls within the discretion of the Tendering Authority as to what type of participants it wants to execute the work contemplated in the tender. A classification between the Joint Ventures/consortia and other juristic entities cannot be said to be so unreasonable as to violate Article 14 of the Constitution of India. As held by the Supreme Court in Meerut Development Authority (supra), a tender process is not open to judicial scrutiny unless it is established to be so tailor-made as to suit the convenience of any particular person.

29. In such context, the allegation of cartelization levelled by the petitioner assumes importance. The petitioner has sought to make out a case that the NIT was tailor-made to suit the purpose of a particular cartel/ cartels. For such proposition, the petitioner relies on the matching bids of at least two of the participants and the plan behind synchronization of the price quoted by five out of the eight bidders, which ensured that each of the said five bidders would be awarded two work contracts. A careful perusal of the materials produced by the petitioner vindicates such stand. Not only were some of the bids exactly identical, the synchronicity between the bids of five tenderers, being the B.K. Enterprise, Equipments & Spare Agency, Bingas Electrical Electronics, S.N. Polymer Pvt. Ltd. and Z Star Commotrade, is clearly reflected in the Financial Bid Chart of the tenders opened on February 6, 2021.

30. Alth

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ough such cartelization has not been proved beyond reasonable doubt, sufficient presumption is raised in that regard by the synchronicity between a majority of the bidders. 31. Such attempt at catering to the participation of only some of the bidders, in conjunction with gross violation of the Finance Department Notification dated November 19, 2004, by precluding price preference and concession in Clause 22.0 of the NIT and making it compulsory to deposit earnest money prior to online uploading of the bids, vitiates the impugned tender process. 32. The respondents could not provide sufficient justification for such patent contravention of the Notification dated November 19, 2004, which binds respondent no.1, the Tendering Authority, which is a Government of West Bengal Undertaking. As such, the impugned tender was de hors the Government Notification and contravened principles of natural justice. Hence, the impugned tender has to be set aside. 33. Accordingly, WPA No.2504 of 2021 is allowed, thereby setting aside the Notice Inviting e-Tender (NIT) dated January 9, 2021 (Annexure P-3 at page 23 of the writ petition), impugned in the present writ petition. Any action and/or work order taken/issued pursuant to such NIT are also hereby set aside and quashed. All connected pending applications are disposed of accordingly. 34. There will be no order as to costs. 35. Urgent certified copies of this order shall be supplied to the parties applying for the same, upon due compliance of all requisite formalities.